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  • greengrassjack greengrassjack Jun 24, 2011 8:59 AM Flag

    Old trader.

    Inlet and Norm, because I value your intellect and superior knowledge of BB&T, I would appreciate very much your thoughts on my situation. I am retired from BB&T and through the years (while working) acquired a substantial amount of stock, in fact, my BB&T holdings would represent 70% of my total investments. I have elected not to sell that stock because I would take such a huge hit. Given the fact that the current economic funk we are in will likely continue for years and not months, coupled with Dodd-Frank and the overwhelmingly negative impact on earnings of BB&T and all banks, I just don't see BB&T stock increasing in value for a long time. And, with the dividends having been decimated the justification for holding on to the stock until a rise in value occurs is impractical. I don't need the cash in the stock to suppliment personal income. My concern is strickly from an ROI perspective. I'm nearly convinced that bailing out of BB&T, taking my lumps now (would result in a net loss north of $200k) and reinvesting the proceeds in something with greater earnings/market value appreciation potential may be the most appropriate course. The one thing that makes me reticent to liquidate the stock is my suspicion that King and the BOD will sell the bank first change they get to enrich themselves. I truly do not belive they have any regard for the employees or shareholders and are driven by what is in their best selfish interest. But, in executing on that selfish motive, selling the bank could be beneficial to all of the shareholders, it could be a means of gaining a premium on the current price without having to wait out a gain in value from improved asset quality, strengthed loan demand and increased earnings. Sorry to run on so long but I can tell you the concerns I have voiced are shared by thousands of currently active and retired BB&T'ers. I look forward to your response.

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    • I share your frustration but I'm positive on both the banking sector and bbt management. If you sell and reinvest I think you should carefully consider the tax consequences. Could be onerous.

      Yes, Dodd-Frank, Tarullo recent comments, and all the negative press on the banking sector and the economy seem like good reasons to throw in the towel. But I think it is precisely the wrong time.

      Even though residential housing makes up around 2% of gdp, the economy will not show a robust recovery until home prices start to recover. Until that happens think we'll bounce along at a 2 to 3% annual gdp pace. Reductions in gov't spending should be more than offset by improvements in business spending and balance of trade. Also, nonresidential and residential construction can only go up - can't get any worse. Multiplier effect is huge.

      Imo not much credence to the double dipper camp. Durable good orders continue to improve. Ytd through May 2011, orders are up 10%, shipments 8% and inventories 13%. Last week aar stats on freight cars, container and trailer shipments continue to be positive. Current pace of business of container and trailer shipments is at the highest level since 2006, the all time high.

      Through mid June, stats from the Fed on the banking sector are unexciting but certainly not a disaster. Loans have stopped shrinking - they're growing about 2% annualized. If you back out real estate loans, loan growth for the second qtr. 2011 is about 9%. Deposits are growing nicely, up 9% annualized pace for the qtr. Allowance for loan losses continues to shrink - down won about 7% for the 2nd qtr. vs. 1st. This is double the reserve release for the 1st qtr. and reflects improved credit metrics.

      Bbt has many positives going forward. Don't enjoy the price shellacking we've been taking. Added to my position last week. I think you're dead wrong about Kelly King.

      • 1 Reply to normlasky
      • Norm - quote all the pluses you want about rail cars, durables, etc. Reality is that about 25% of home buyers are under water (they owe more on the mortgage than it is worth).

        From this alone you will continue to see a negative feedback loop in housing because some of those under water are going to mail the keys to the bank. So housing prices can absolutely go lower and many of the real estate pros are saying 5-10% lower over the next year beacause of inventory and shadow inventory (houses where the banks are not receiving payment and will foreclose, as well as people who want to sell but don't put the home on the market given current conditions).

        The second item is employment. With 9+% unemployment and 16-17% underemployment you have removed a large portion of the population from the house buying market. In order for many of these people to find work they may/will need to relocate. And - when things get dire enough they will (more keys mailed to the bank?). You cannot have a vibrant housing market with these levels of unemployment.

        Finally - yes many companes are back close to historical levels of production, but they are doing it with fewer people (more technology and automation) so you have a structural employment problem until you have a massive retraining program which will take years - not months.

        Can we have a double dip with fairly robust levels of production? I believe we can as the commerical paradigm has changed in the past 5-6 years.

        I appreciate a difference of opinion as I know you do.

    • Although I am not a former BB&T employee I find a great portion of my retirement funds depend on BB&T dividends. It is my belief many other longtime holders of BB&T stock find themselves in a similar situation.

      I await Norm's reply!!!!

    • Without knowing more about you total situation it is hard to offer more than some general (may or may not apply to your specific situation) comments.

      Do you have other taxable income that can be postponed (ie 401k/IRA withdrawals) so you can sell part of your stake without affecting your tax situation? Keep in mind that your gains may be subject to long term capital gains taxes only.

      If you are drawing Social Security then too much income can cause those benefits to be taxed... That is a consideration.

      I think you probably need to discusss the tax consequences with a tax advisor (or accountant). My guess is you want to set up a program to sell part of your holdings now and then sell a portion at regular intervals to avoid a huge tax hit in any one year. But, this is strictly a guess based on incomplete information.

      If you decide to not sell then I would suggest you consider selling covered calls on all or part of you holdings to generate additional income to supplement the dividends. You need to monitor this to make sure you only get called on an amount that you are willing to sell in any given tax year. Good luck - your problem is a good one to have.

    • Sir,

      Do not fear that you will sell and then BB&T will be put on the block. These guys will NEVER sell this bank because (a) they believe they have built a better mouse trap (untrue) than everyone else, (b)they believe they are smarter than everyone else (also untrue), (c) if they sit on their current busted credit model for another 30 years the market will come to them (also untrue), and finally (d) if enough people read Ayn Rand novels then the stock will got to $60 (giggle giggle).

      Sell now, buy gold. When treasury prices fall (and they will) this stock will be in the teens. you can buy it back then.

37.72+0.44(+1.18%)Sep 30 4:02 PMEDT